First Home Buyers Access to Superannuation

Mr President, it looks like you need something to wake you up, so I thought I would rise to my feet to help you. No offence there, Senator Xenophon.

I wanted to speak tonight about something that is quite personal for me and something that was very important to my wife and me in our time together, which is only very short in the scheme of things. We have been married for just over 10 years, and the hardest thing that we have had to do in that time is save up for and buy our first home. I know that this issue is very close to Senator Xenophon's heart as well. It was hard because, as most people in this chamber would know, since the early 2000s there has been a great run up in house prices. Home ownership is becoming increasingly unaffordable for young families in Australia.

I do not mean to make this too personal, but I am perhaps one of the few in this chamber and this parliament who have had to buy their first home since those prices ran up. We were starting our family during this time, and it was very difficult to save up the money for a significant deposit while having kids, while my wife was necessarily out of the workforce and while still trying to pay rent in a very costly market. At the time we were trying to save for our first home and save for that deposit, my wife and I had tens of thousands of dollars in superannuation: our money, which we had worked for, which had been paid to us and which, because of the regulation that we have on superannuation, we were not allowed to use. I thought it was an inequity that we could not use our money to buy something as important as our first home, where we would raise our children and, hopefully, ultimately build ourselves a nest egg for our retirement.

Obviously, this is an idea that has been kicking around for some time. I point out that one of the first people to support and propose this idea was Mr Paul Keating, in 1993. At the 1993 election, Mr Keating launched the Labor Party's election platform at the Bankstown Hall. In that platform policy, he promised to let all Australians draw down from their superannuation, up to $10,000, to purchase their own homes. In launching that policy, the Labor Party said:

For most people … a debt-free home is as important a part of retirement security as superannuation income.

And they were right. They were right 20 years ago. It is unfortunate that they have moved away from that position.

I would like to return to that position and go through some of the arguments that have been raised against this idea, in the last couple of weeks, as it has been aired. I start with an argument that Mr Keating has now made against this idea, despite supporting it 20 years ago. Mr Keating said that we should not do this because, if we allowed people to purchase their own homes, they would lose the compounding interest of investment. Yes, it is very important that you save and put your money into assets so they grow and over time you will be wealthier. But that forgets the fact that putting your money into superannuation is not the only form of asset, that putting your money into equities is not necessarily the only or best-performing asset and that putting your money into bricks and mortar also lets you gain from the benefits of compounding, as has been experienced in the last 20 years in Australian property markets. Indeed, the ASX 2014 Long-term investing report shows that, over that period of time, property has earned a return of 9.9 per cent a year in nominal terms, compared to equities, which have returned 8.7 per cent a year. So putting your money in your home is not just good for you, your family and your financial security, it is a good investment.

The second argument that has been made against this idea is that it may undermine the retirement-income system. That is connected to the first point, the first argument against it: the loss of compounding. But there is a broader issue here that people will not catch up on their savings if they take money out in their young ages. The first point I make about that is the superannuation system, right now, does not do a very good job of keeping people off the pension. After more than 20 years of having superannuation, 70 per cent of retirees claim the pension. In the Intergenerational report, Treasury projected that over the next 40 years—and in that period we will start to have retirees who have had their whole working lives contributing to superannuation—that figure will drop from 70 per cent to 67 per cent. According to Treasury, in 2054-55, after we have had our superannuation system in place for 65 years, we will still have a situation where 67 per cent of retirees claim the pension. 

The principal reason for that is that superannuation does not guarantee you income when you are 80 or 90, it only guarantees you income when you retire. So at 55 or 60 you have income and you can do whatever you like with it—buy homes, go overseas or buy fast cars—but it does not guarantee that people have an income throughout their entire retirement.

The second point to make about that argument is that it depends how any such idea was put in place. Such a scheme has existed in Canada for 22 years now; young people can borrow from their future selves, from their superannuation, to buy a home and then they are required to pay it back after they are 35 years of age. They can borrow $25,000 a year to put into a home when they are young and, when they are 35 or over, they have to increase their superannuation contributions to pay that back. That seems to be a very sensible system. It is more sensible to borrow from yourself than to borrow from the bank and to have to pay lender's mortgage insurance which just goes to other banks overseas and does not help young people here.

An argument often made against this is that providing more money to first home buyers will push up house prices. It is strange to argue that by helping people we are going to make it harder for them. The only way that works is if the supply of housing is completely unresponsive to price or, even more unusually, that it actually reduces the supply of housing by increasing demand. That is clearly not the case. Yes, in certain pockets of our property markets, supply is rather inelastic and unresponsive to price. But in many of the areas where first home buyers typically buy their homes there is not a limited supply of land. I bought my first time on the fringes of Canberra, where there is plenty of land. There is not a limited supply and supply is not unresponsive to price. This would be a well designed policy because it would help people who want to build homes in those areas of our cities, where there is a comparatively good supply of housing.

That is not to say there are not issues at the state government level on the supply of housing and that there are not things that need to be done there., but that is not something we can do in this chamber. I do think we should help young people, and this is a good way of doing that. It works overseas, as I said before. The Canadian government has had it in place for 22 years and one-eighth of first home buyers in Canada now use this scheme to buy their homes. That is not a majority, it is not abused—many people still can afford to save up for their own deposit—but one-eighth is not an insignificant number of people. And I believe that it is probably the people who would otherwise struggle to save a deposit who would access such a scheme.

It also has some other benefits that are not often commented on. One of the big problems we have in our financial sector at the moment is people taking on too much debt with too little equity. When I bought my first home I had five per cent equity. I would have been a bit underwater if anything went wrong, but that is all we could afford. If we allowed people to dip into their super, they would have more equity, there would be more financial security and there would be less risk in our financial sector if the worst happened and prices fell—and that is another good thing that we should promote. It would also at the moment be a significant boon to the construction sector. Again, first home buyers often buy house and land packages on the fringe of cities. We need to build more houses in this country at the moment. We need something to replace the investment we have had in the mining sector which has fallen away. Housing is the great hope of future. We might get some boost in investment in new houses and such a scheme could help promote that.

The main reason we should support this policy—and it is something that I put in my first speech—is that we should strive to help everybody own their own home, start their own family or start their own business, if that is what they want to do, and take control of their own lives. Owning your own little piece of Australia is the first step for most Australians in doing that. They will have a little piece of land that they can call their own and they can be king of their own castle. We should help them achieve that as soon as possible with the money that they save up. We should not put restrictions on them by telling them how to invest their money and not giving them financial security. We should be supporting people to have a go in our society. If they want to save up to invest in the most important asset of their lives, that is something we should support and celebrate. We should assist people to do this by removing the chains on their superannuation accounts.

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